Dollar Triangle Against The Euro
By Colin Twiggs
July 16, 2009 2:00 a.m. ET (4:00 p:m AET)
US Dollar Index
The US Dollar Index is testing support after consolidating in a narrow band between 79.50 and 81 for several weeks. Downward breakout, in the direction of the primary trend, is more likely and would warn of a decline with a target of 73. Penetration of support at 78.50 would confirm. Upward breakout is not expected, but would test resistance from the March low at 83.
The euro displays a triangular consolidation against the greenback — a continuation pattern. Breakout above resistance at $1.42 would signal another primary advance with a target of $1.50. Reversal below $1.38 is unlikely, but would warn that the up-trend is weakening.
The dollar pulled back to test the new resistance level after downward breakout below ¥94 [orange]. Recovery above the upper trend channel/long-term moving average would warn of a bear trap, while respect of the upper trend channel would signal another down-swing. In the longer term, expect a test of the December low of ¥87.
The Aussie dollar recovered above support at $0.78 after a marginal break gave a false bear signal. An up-turn on the CRB Commodities Index is a positive sign for the resource-rich currency. Expect a test of resistance at $0.82. Upward breakout is now likely, and would offer a target of the September 2008 high at $0.85. Reversal below $0.77 is unlikely, but would test support at $0.70.
Whatever it is that the government does, sensible Americans would prefer that the government does it to somebody else.
This is the idea behind foreign policy.
~ P. J. O'Rourke